Withholding Federal Income Tax on Scholarships, Fellowships, and Grants Paid to Aliens

 

In general, U.S. source taxable scholarships, fellowships, and grants that do not represent compensation for services are not subject to withholding when paid to U.S. citizens and residents, but they are subject to withholding when paid to nonresident aliens.

The withholding tax rate is 30%. However, the withholding tax rate may be reduced to 14% (or a lower treaty rate) if you are a nonresident alien student, researcher, or grantee who is temporarily present in the United States with an "F," "J," "M," or "Q" visa, and the taxable amounts you received are either:

  1. Incident to a qualified scholarship to which section 117(a) applies; or
  2. Granted by certain types of organizations described in section 1441(b)(2).

If, immediately before arriving in the United States, you were a tax resident of a country that has an income tax treaty with the United States, and then you may be eligible for benefits under the treaty, such as an exemption from tax, with respect to your scholarship, fellowship, or grant, including a specified amount that represents compensation for services.

Any part of your scholarship, fellowship, or grant that represents compensation for services performed in the United States is subject to graduated withholding.

For more information on scholarships, fellowships, and grants, see the "Scholarships and Fellowship Grants Subject to Chapter 3 Withholding" topic within the Withholding on Specific Income section of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. See also Publication 519, U.S. Tax Guide for Aliens, and Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, and its instructions.

References/Related Topics

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.